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Endogenous Demographic Change, Retirement, And Social Security

Author

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  • Cipriani, Giam Pietro
  • Fioroni, Tamara

Abstract

In this paper, we analyze the effects of demographic change on a pay-as-you-go (PAYG) pension system, financed with a defined contribution scheme. In particular, we examine the relationship between retirement, fertility, and pensions in a three-period overlapping generations model. We focus on both the case of mandatory retirement and the case where the retirement age is freely chosen. In the case of mandatory retirement, increasing longevity has an unambiguously negative impact on fertility and pension payouts and a positive effect on the level of physical capital in the steady state. On the other hand, when agents choose the time of retirement, an increase in life expectancy positively affects physical capital only when the tax rate is sufficiently low and can have a positive impact on pension benefits, because agents may find it optimal to retire later and to decrease fertility less. Finally, the effects of the social security tax on capital per worker are negative with mandatory retirement; however, they could be positive in the optimal retirement case.

Suggested Citation

  • Cipriani, Giam Pietro & Fioroni, Tamara, 2021. "Endogenous Demographic Change, Retirement, And Social Security," Macroeconomic Dynamics, Cambridge University Press, vol. 25(3), pages 609-631, April.
    • Handle: RePEc:cup:macdyn:v:25:y:2021:i:3:p:609-631_2
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    Cited by:

    1. Baldi, Mauro Maria & Coppier, Raffaella & Michetti, Elisabetta, 2025. "Elderly labor supply, endogenous grandparental childcare, and fertility in an OLG model," Economic Modelling, Elsevier, vol. 149(C).
    2. Jaimes, Richard & Westerhout, Ed, 2023. "Optimal policies in an ageing society," The Journal of the Economics of Ageing, Elsevier, vol. 26(C).
    3. Chen, Hung-Ju & Huang, Shang-Chieh & Miyazaki, Koichi, 2024. "Life expectancy, fertility, and retirement in an endogenous-growth model with human capital accumulation," Economic Modelling, Elsevier, vol. 130(C).
    4. Chen Hung-Ju & Miyazaki Koichi, 2022. "Pay-as-You-Go Social Security and Educational Subsidy in an Overlapping Generations Model with Endogenous Fertility and Endogenous Retirement," The B.E. Journal of Macroeconomics, De Gruyter, vol. 22(2), pages 787-820, June.
    5. Kim, Jae-Yoon & Lee, Dongwoo, 2024. "Pension systems revisited in the age of automation and an aging economy," Journal of Economic Behavior & Organization, Elsevier, vol. 228(C).
    6. Cipriani, Giam Pietro & Fioroni, Tamara, 2022. "Social security and endogenous demographic change: child support and retirement policies," Journal of Pension Economics and Finance, Cambridge University Press, vol. 21(3), pages 307-325, July.
    7. Cipriani, Giam Pietro & Fioroni, Tamara, 2024. "Human capital and pensions with endogenous fertility and retirement," Macroeconomic Dynamics, Cambridge University Press, vol. 28(2), pages 478-494, March.
    8. Wei Gao & Chengliang Yan & Fuyang Zhao, 2021. "Longevity, Grandparents Caring, and PAYG Pensions," Annals of Economics and Finance, Society for AEF, vol. 22(2), pages 451-465, November.
    9. Wang, Minglu & Pan, Yifan & Jing, Peng, 2025. "Balancing economic growth and pension adequacy: The combined effects of contribution rate reduction and retirement age postponement," International Review of Economics & Finance, Elsevier, vol. 102(C).
    10. Cho, Dooyeon & Lee, Kyung-woo, 2025. "Pension sustainability and government effectiveness in the presence of population aging," Economic Modelling, Elsevier, vol. 147(C).
    11. Yan Wu & Changsheng Xu & Ming Yi, 2022. "The Optimal Choice of Delayed Retirement Policy in China," Sustainability, MDPI, vol. 14(19), pages 1-21, October.
    12. João Vinícius de França Carvalho & Eduardo Flores & Emiliano A. Valdez, 2022. "The Relevance and Challenges of the Insurance Industry in Contemporary Administration: A Call for Researchers," RAC - Revista de Administração Contemporânea (Journal of Contemporary Administration), ANPAD - Associação Nacional de Pós-Graduação e Pesquisa em Administração, vol. 26(3), pages 210313-2103.
    13. Sipei Xu & Jia Zhang, 2022. "Do Social Pensions Affect the Physical and Mental Health of Rural Children in China? An Intergenerational Care Perspective," IJERPH, MDPI, vol. 19(7), pages 1-25, March.
    14. Li, Jie & Zhao, Yaohui & Bao, Yangming, 2025. "Demographic transitions and global sourcing: Firm-level evidence from China," Economic Modelling, Elsevier, vol. 150(C).

    More about this item

    JEL classification:

    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H8 - Public Economics - - Miscellaneous Issues
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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